##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 UNITED COMMUNITY FINANCIAL CORP.
  OHIO
    
    0-024399
    
    34-1856319(State or other
jurisdiction of
incorporation)
    
    (Commission File No.)
    
    (IRS Employer I.D. No.)
 275 West Federal Street, Youngstown, Ohio 44503-1203
 (330) 742-0500
 (Former name or former address, if changed since last report)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
  o þ




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##### 



TABLE OF CONTENTS
 PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of March 31, 2011 (Unaudited) and December 31, 2010
    
    
    1Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 (Unaudited)
    
    
    2Consolidated Statement of Shareholders Equity for the Three Months ended March 31, 2011 and 2010 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6-33Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34-44Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    46Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    47Item 1A. Risk Factors
    
    
    47Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3. Defaults Upon Senior Securities (None)Item 4. (Removed and Reserved)Item 5. Other Information (None)Item 6. Exhibits
    
    
    47Signatures
    
    
    48Exhibits
    
    
    49Exhibit 31.1Exhibit 31.2Exhibit 32




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    Financial Statements
 UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Assets:Cash and deposits with banks
    
    $
    18,497
    
    
    $
    18,627Federal funds sold
    
    
    20,181
    
    
    
    18,480Total cash and cash equivalents
    
    
    38,678
    
    
    
    37,107Securities:Available for sale, at fair value
    
    
    289,388
    
    
    
    362,042Loans held for sale
    
    
    2,531
    
    
    
    10,870Loans, net of allowance for loan losses of $46,415 and $50,883
    
    
    1,620,094
    
    
    
    1,649,486Federal Home Loan Bank stock, at cost
    
    
    26,464
    
    
    
    26,464Premises and equipment, net
    
    
    21,760
    
    
    
    22,076Accrued interest receivable
    
    
    7,684
    
    
    
    7,720Real estate owned and other repossessed assets
    
    
    42,873
    
    
    
    40,336Core deposit intangible
    
    
    448
    
    
    
    485Cash surrender value of life insurance
    
    
    27,560
    
    
    
    27,303Other assets
    
    
    37,600
    
    
    
    13,409Total assets
    
    $
    2,115,080
    
    
    $
    2,197,298Liabilities and Shareholders EquityLiabilities:Deposits:Interest bearing
    
    $
    1,568,161
    
    
    $
    1,551,210Non-interest bearing
    
    
    144,362
    
    
    
    138,571Total deposits
    
    
    1,712,523
    
    
    
    1,689,781Borrowed funds:Federal Home Loan Bank advances
    
    
    100,954
    
    
    
    202,818Repurchase agreements and other
    
    
    100,446
    
    
    
    97,797Total borrowed funds
    
    
    201,400
    
    
    
    300,615Advance payments by borrowers for taxes and insurance
    
    
    13,219
    
    
    
    20,668Accrued interest payable
    
    
    905
    
    
    
    809Accrued expenses and other liabilities
    
    
    9,662
    
    
    
    9,370Total liabilities
    
    
    1,937,709
    
    
    
    2,021,243Shareholders Equity:Preferred stock-no par value; 1,000,000 shares authorized and unissued
    
    
    
    
    
    
    Common
stock-no par value; 499,000,000 shares authorized; 37,804,457 shares issued and 30,951,032 and 30,937,704 shares, respectively, outstanding
    
    
    142,404
    
    
    
    142,318Retained earnings
    
    
    113,911
    
    
    
    111,049Accumulated other comprehensive loss
    
    
    (6,551
    )
    
    
    (4,778
    )Treasury stock, at cost, 6,853,425 and 6,866,753 shares, respectively
    
    
    (72,393
    )
    
    
    (72,534
    )Total shareholders equity
    
    
    177,371
    
    
    
    176,055Total liabilities and shareholders equity
    
    $
    2,115,080
    
    
    $
    2,197,298
 See Notes to Consolidated Financial Statements.
  1




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the Three Months EndedMarch 31,2011
    
    
    2010(Dollars in thousands, except per share data)Interest incomeLoans
    
    $
    22,510
    
    
    $
    25,843Loans held for sale
    
    
    66
    
    
    
    70Available for sale securities
    
    
    2,847
    
    
    
    2,585Federal Home Loan Bank stock dividends
    
    
    300
    
    
    
    300Other interest earning assets
    
    
    9
    
    
    
    7Total interest income
    
    
    25,732
    
    
    
    28,805Interest expenseDeposits
    
    
    6,331
    
    
    
    9,318Federal Home Loan Bank advances
    
    
    825
    
    
    
    848Repurchase agreements and other
    
    
    922
    
    
    
    923Total interest expense
    
    
    8,078
    
    
    
    11,089Net interest income
    
    
    17,654
    
    
    
    17,716Provision for loan losses
    
    
    2,192
    
    
    
    12,450Net interest income after provision for loan losses
    
    
    15,462
    
    
    
    5,266Non-interest incomeNon-deposit investment income
    
    
    354
    
    
    
    428Service fees and other charges
    
    
    1,453
    
    
    
    1,751Net gains (losses):Securities available for sale
    
    
    1,313
    
    
    
    2,843Other -than-temporary loss in equity securitiesTotal impairment loss
    
    
    (10
    )
    
    
    Loss recognized in other comprehensive income
    
    
    
    
    
    
    Net impairment loss recognized in earnings
    
    
    (10
    )
    
    
    Mortgage banking income
    
    
    622
    
    
    
    386Real estate owned and other repossessed assets
    
    
    (992
    )
    
    
    (1,484
    )Gain on sale of retail branch
    
    
    
    
    
    
    1,387Other income
    
    
    1,248
    
    
    
    1,249Total non-interest income
    
    
    3,988
    
    
    
    6,560Non-interest expenseSalaries and employee benefits
    
    
    7,684
    
    
    
    8,174Occupancy
    
    
    905
    
    
    
    1,004Equipment and data processing
    
    
    1,694
    
    
    
    1,667Franchise tax
    
    
    469
    
    
    
    511Advertising
    
    
    121
    
    
    
    222Amortization of core deposit intangible
    
    
    37
    
    
    
    48Deposit insurance premiums
    
    
    1,405
    
    
    
    1,461Professional fees
    
    
    962
    
    
    
    1,033Real estate owned and other repossessed asset expenses
    
    
    873
    
    
    
    607Other expenses
    
    
    2,338
    
    
    
    2,241Total non-interest expenses
    
    
    16,488
    
    
    
    16,968Income (loss) before income taxes
    
    
    2,962
    
    
    
    (5,142
    )Income tax expense (benefit)
    
    
    
    
    
    
    Net income (loss)
    
    $
    2,962
    
    
    $
    (5,142
    )
  2




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UNITED COMMUNITY FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
 For the Three Months EndedMarch 31,2011
    
    
    2010Net income (loss)
    
    $
    2,962
    
    
    $
    (5,142
    )Other comprehensive incomeUnrealized losses on securities, net
    
    
    (1,773
    )
    
    
    (425
    )Comprehensive income (loss)
    
    $
    1,189
    
    
    $
    (5,567
    )Earnings (loss) per shareBasic
    
    $
    0.10
    
    
    $
    (0.17
    )Diluted
    
    
    0.10
    
    
    
    (0.17
    )
 See Notes to Consolidated Financial Statements.
  3




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 (Unaudited)
 UnearnedEmployeeAccumulated
    
    
    StockOther
    
    
    OwnershipShares
    
    
    Common
    
    
    Retained
    
    
    Comprehensive
    
    
    Plan
    
    
    TreasuryOutstanding
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Stock
    
    
    Total(Dollars thousands, except per share data)Balance December 31, 2010
    
    
    30,938
    
    
    $
    142,318
    
    
    $
    111,049
    
    
    $
    (4,778
    )
    
    $
    
    
    
    $
    (72,534
    )
    
    $
    176,055Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    2,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,962Change in net unrealized gain/(loss)
on securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,773
    )
    
    
    
    
    
    
    
    
    
    
    (1,773
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189Stock based compensation
    
    
    13
    
    
    
    86
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    127Balance March 31, 2011
    
    
    30,951
    
    
    $
    142,404
    
    
    $
    113,911
    
    
    $
    (6,551
    )
    
    $
    
    
    
    $
    (72,393
    )
    
    $
    177,371Balance December 31, 2009
    
    
    30,898
    
    
    $
    145,775
    
    
    $
    148,674
    
    
    $
    4,110
    
    
    $
    (5,821
    )
    
    $
    (72,955
    )
    
    $
    219,783Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    (5,142
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,142
    )Change in net unrealized gain/(loss)
on securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (425
    )
    
    
    
    
    
    
    
    
    
    
    (425
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,567
    )Shares allocated to ESOP participants
    
    
    
    
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    455
    
    
    
    
    
    
    
    235Stock based compensation
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Balance March 31, 2010
    
    
    30,898
    
    
    $
    145,586
    
    
    $
    143,532
    
    
    $
    3,685
    
    
    $
    (5,366
    )
    
    $
    (72,955
    )
    
    $
    214,482
 See Notes to Consolidated Financial Statements.
  4




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,2011
    
    
    2010(Dollars in thousands)Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    2,962
    
    
    $
    (5,142
    )Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    2,192
    
    
    
    12,450Mortgage banking income
    
    
    (622
    )
    
    
    (386
    )Net losses on real estate owned and other repossessed assets sold
    
    
    992
    
    
    
    1,484Net gain on retail branch sold
    
    
    
    
    
    
    (1,387
    )Net gain on available for sale securities sold
    
    
    (1,313
    )
    
    
    (2,843
    )Net gains on other assets sold
    
    
    (10
    )
    
    
    (3
    )Other than temporary impairment of securities available for sale
    
    
    10
    
    
    
    Amortization of premiums and accretion of discounts
    
    
    428
    
    
    
    971Depreciation and amortization
    
    
    453
    
    
    
    509Decrease in interest receivable
    
    
    36
    
    
    
    685Increase in interest payable
    
    
    96
    
    
    
    330Decrease
(increase) in prepaid and other assets
    
    
    408
    
    
    
    (1,366
    )Increase in other liabilities
    
    
    292
    
    
    
    882Stock based compensation
    
    
    127
    
    
    
    31Net principal disbursed on loans originated for sale
    
    
    (36,760
    )
    
    
    (39,870
    )Proceeds from sale of loans originated for sale
    
    
    45,721
    
    
    
    44,650ESOP compensation
    
    
    
    
    
    
    235Net cash from operating activities
    
    
    15,012
    
    
    
    11,230Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Securities available for sale
    
    
    10,703
    
    
    
    14,136Proceeds from sale of:Securities available for sale
    
    
    63,202
    
    
    
    118,947Real estate owned and other repossessed assets
    
    
    4,978
    
    
    
    3,222Premises and equipment
    
    
    10
    
    
    
    20Purchases of:Securities available for sale
    
    
    (26,858
    )
    
    
    (122,131
    )Principal disbursed on loans, net of repayments
    
    
    19,913
    
    
    
    21,576Loans purchased
    
    
    (1,338
    )
    
    
    (1,206
    )Purchases of premises and equipment
    
    
    (129
    )
    
    
    (75
    )Sale of retail branch
    
    
    
    
    
    
    (22,503
    )Net cash from investing activities
    
    
    70,481
    
    
    
    11,986Cash Flows from Financing ActivitiesNet increase in checking, savings and money market accounts
    
    
    28,462
    
    
    
    14,474Net decrease in certificates of deposit
    
    
    (5,720
    )
    
    
    (29,175
    )Net decrease in advance payments by borrowers for taxes and insurance
    
    
    (7,449
    )
    
    
    (6,030
    )Proceeds from Federal Home Loan Bank advances
    
    
    33,000
    
    
    
    257,000Repayment of Federal Home Loan Bank advances
    
    
    (134,864
    )
    
    
    (264,224
    )Net change in repurchase agreements and other borrowed funds
    
    
    2,649
    
    
    
    (280
    )Net cash from financing activities
    
    
    (83,922
    )
    
    
    (28,235
    )Change in cash and cash equivalents
    
    
    1,571
    
    
    
    (5,019
    )Cash and cash equivalents, beginning of period
    
    
    37,107
    
    
    
    45,074Cash and cash equivalents, end of period
    
    $
    38,678
    
    
    $
    40,055
 See Notes to Consolidated Financial Statements
  5




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UNITED COMMUNITY FINANCIAL CORP.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. BASIS OF PRESENTATION
     2. REGULATORY ENFORCEMENT ACTION
      6




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3. RECENT ACCOUNTING DEVELOPMENTS
 A Creditors
Determination of whether a Restructuring Is a Troubled Debt Restructuring.
 Deferral of the Effective Date of Disclosures about TDR in Update No. 2010-20
 4. STOCK COMPENSATION
 Stock Options:
      7




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##### Table of Contents



For the three months ended March 31, 2011Weighted
    
    
    Aggregateaverage
    
    
    intrinsic valueShares
    
    
    exercise price
    
    
    (in thousands)Outstanding at beginning of year
    
    
    2,237,322
    
    
    $
    6.88Granted
    
    
    3,866
    
    
    
    1.50Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (161,849
    )
    
    
    7.46Outstanding at end of period
    
    
    2,079,339
    
    
    $
    6.82
    
    
    $
    1Options exercisable at end of period
    
    
    1,770,546
    
    
    $
    7.66
    
    
    $
    
  March 31, 2011Intrinsic value of options exercised
    
    
    n/aCash received from option exercises
    
    
    n/aTax benefit realized from option exercises
    
    
    n/aWeighted average fair value of options granted, per share
    
    $
    0.97
   January 6, 2011Risk-free interest rate
    
    
    2.09
    %Expected term (years)
    
    
    5Expected stock volatility
    
    
    79.9Dividend yield
    
    
    
    %
  Restricted Stock Awards:
   8




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##### Table of Contents



Weightedaverage grantShares
    
    
    date fair valueNonvested shares at January 1, 2011
    
    
    39,879
    
    
    $
    1.32Granted
    
    
    13,328
    
    
    
    1.50Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested shares at March 31, 2011
    
    
    53,207
    
    
    $
    1.37
 5. SECURITIES
  March 31, 2011(Dollars in thousands)Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and government sponsored entities securities
    
    $
    64,849
    
    
    $
    
    
    
    $
    (1,984
    )
    
    $
    62,865Equity securities
    
    
    192
    
    
    
    135
    
    
    
    
    
    
    
    327Mortgage-backed securities GSE issued: residential
    
    
    229,702
    
    
    
    99
    
    
    
    (3,605
    )
    
    
    226,196Total
    
    $
    294,743
    
    
    $
    234
    
    
    $
    (5,589
    )
    
    $
    289,388
 December 31, 2010(Dollars in thousands)Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and government sponsored entities securities
    
    $
    65,099
    
    
    $
    
    
    
    $
    (2,164
    )
    
    $
    62,935Equity securities
    
    
    235
    
    
    
    159
    
    
    
    
    
    
    
    394Mortgage-backed securities GSE issued: residential
    
    
    300,290
    
    
    
    1,688
    
    
    
    (3,265
    )
    
    
    298,713Total
    
    $
    365,624
    
    
    $
    1,847
    
    
    $
    (5,429
    )
    
    $
    362,042
  9




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March 31, 2011(Dollars in thousands)Amortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    
    
    
    
    Due after five years through ten years
    
    
    64,849
    
    
    
    62,865Mortgage-backed securities: residential
    
    
    229,702
    
    
    
    226,196Total
    
    $
    294,551
    
    
    $
    289,061
    March 31, 2011(Dollars in thousands)Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossU.S. Treasury and government
sponsored entities securities
    
    $
    62,865
    
    
    $
    (1,984
    )
    
    $
    
    
    
    $
    
    
    
    $
    62,865
    
    
    $
    (1,984
    )Mortgage-backed securities GSE issued: residential
    
    
    228,392
    
    
    
    (3,605
    )
    
    
    
    
    
    
    
    
    
    
    228,392
    
    
    
    (3,605
    )Total
    
    $
    291,257
    
    
    $
    (5,589
    )
    
    $
    
    
    
    $
    
    
    
    $
    291,257
    
    
    $
    (5,589
    )
 December 31, 2010(Dollars in thousands)Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossU.S. Treasury and government
sponsored entities securities
    
    $
    62,935
    
    
    $
    (2,164
    )
    
    $
    
    
    
    $
    
    
    
    $
    62,935
    
    
    $
    (2,164
    )Mortgage-backed securities GSE issued: residential
    
    
    203,569
    
    
    
    (3,265
    )
    
    
    
    
    
    
    
    
    
    
    203,569
    
    
    
    (3,265
    )Total
    
    $
    266,504
    
    
    $
    (5,429
    )
    
    $
    
    
    
    $
    
    
    
    $
    266,504
    
    
    $
    (5,429
    )
    10




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##### Table of Contents



6. LOANS
  March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Real Estate:One-to four-family residential
    
    $
    762,065
    
    
    $
    757,426Multi-family residential
    
    
    131,246
    
    
    
    135,771Nonresidential
    
    
    328,772
    
    
    
    331,390Land
    
    
    25,624
    
    
    
    25,138Construction:One-to four-family residential and land development
    
    
    88,075
    
    
    
    108,583Multi-family and nonresidential
    
    
    11,201
    
    
    
    15,077Total real estate
    
    
    1,346,983
    
    
    
    1,373,385ConsumerHome equity
    
    
    216,386
    
    
    
    220,582Auto
    
    
    11,179
    
    
    
    11,525Marine
    
    
    6,807
    
    
    
    7,285Recreational vehicles
    
    
    34,066
    
    
    
    35,671Other
    
    
    4,040
    
    
    
    4,390Total consumer
    
    
    272,478
    
    
    
    279,453CommercialSecured
    
    
    31,574
    
    
    
    28,876Unsecured
    
    
    14,198
    
    
    
    17,428Total commercial
    
    
    45,772
    
    
    
    46,304Total loans
    
    
    1,665,233
    
    
    
    1,699,142Less:Allowance for loan losses
    
    
    46,415
    
    
    
    50,883Deferred loan costs, net
    
    
    (1,276
    )
    
    
    (1,227
    )Total
    
    
    45,139
    
    
    
    49,656Loans, net
    
    $
    1,620,094
    
    
    $
    1,649,486
   11




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##### Table of Contents



Quarter ended
    
    
    Quarter endedMarch 31,
    
    
    March 31,2011
    
    
    2010(Dollars in thousands)Balance, beginning of year
    
    $
    50,883
    
    
    $
    42,287Provision for loan losses
    
    
    2,192
    
    
    
    12,450Amounts charged off
    
    
    (7,226
    )
    
    
    (7,140
    )Recoveries
    
    
    566
    
    
    
    171Balance, end of year
    
    $
    46,415
    
    
    $
    47,768
  Allowance For Loan Losses(Dollars in thousands)PermanentReal Estate
    
    
    Construction
    
    
    Consumer
    
    
    CommercialLoans
    
    
    Loans
    
    
    Loans
    
    
    Loans
    
    
    Unallocated
    
    
    TotalMarch 31, 2011Beginning balance
    
    $
    28,066
    
    
    $
    8,533
    
    
    $
    5,260
    
    
    $
    9,024
    
    
    $
    
    
    
    $
    50,883Provision
    
    
    1,554
    
    
    
    (464
    )
    
    
    592
    
    
    
    510
    
    
    
    
    
    
    
    2,192Chargeoffs
    
    
    (2,878
    )
    
    
    (2,352
    )
    
    
    (1,030
    )
    
    
    (966
    )
    
    
    
    
    
    
    (7,226
    )Recoveries
    
    
    249
    
    
    
    57
    
    
    
    174
    
    
    
    86
    
    
    
    
    
    
    
    566Net chargeoffs
    
    
    (2,629
    )
    
    
    (2,295
    )
    
    
    (856
    )
    
    
    (880
    )
    
    
    
    
    
    
    (6,660
    )Ending balance
    
    $
    26,991
    
    
    $
    5,774
    
    
    $
    4,996
    
    
    $
    8,654
    
    
    $
    
    
    
    $
    46,415Period-end amount allocated to:Loans individually
evaluated for impairment
    
    $
    5,069
    
    
    $
    3,334
    
    
    $
    
    
    
    $
    3,858
    
    
    $
    
    
    
    $
    12,261Loans collectively
evaluated for impairment
    
    
    21,922
    
    
    
    2,440
    
    
    
    4,996
    
    
    
    4,796
    
    
    
    
    
    
    
    34,154Ending balance
    
    $
    26,991
    
    
    $
    5,774
    
    
    $
    4,996
    
    
    $
    8,654
    
    
    $
    
    
    
    $
    46,415Period-end balances:Loans individually
evaluated for impairment
    
    $
    106,023
    
    
    $
    47,687
    
    
    $
    1,373
    
    
    $
    14,515
    
    
    $
    
    
    
    $
    169,598Loans collectively
evaluated for impairment
    
    
    1,141,684
    
    
    
    51,589
    
    
    
    271,105
    
    
    
    31,257
    
    
    
    
    
    
    
    1,495,635Ending balance
    
    $
    1,247,707
    
    
    $
    99,276
    
    
    $
    272,478
    
    
    $
    45,772
    
    
    $
    
    
    
    $
    1,665,233
   12




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##### Table of Contents



Allowance For Loan Losses(Dollars in thousands)PermanentReal Estate
    
    
    Construction
    
    
    Consumer
    
    
    CommercialLoans
    
    
    Loans
    
    
    Loans
    
    
    Loans
    
    
    Unallocated
    
    
    TotalDecember 31, 2010Beginning balance
    
    $
    15,288
    
    
    $
    19,020
    
    
    $
    4,959
    
    
    $
    3,020
    
    
    $
    
    
    
    $
    42,287Provision
    
    
    40,595
    
    
    
    10,028
    
    
    
    4,079
    
    
    
    7,725
    
    
    
    
    
    
    
    62,427Chargeoffs
    
    
    (28,153
    )
    
    
    (20,648
    )
    
    
    (4,316
    )
    
    
    (1,962
    )
    
    
    
    
    
    
    (55,079
    )Recoveries
    
    
    336
    
    
    
    133
    
    
    
    538
    
    
    
    241
    
    
    
    
    
    
    
    1,248Net chargeoffs
    
    
    (27,817
    )
    
    
    (20,515
    )
    
    
    (3,778
    )
    
    
    (1,721
    )
    
    
    
    
    
    
    (53,831
    )Ending balance
    
    $
    28,066
    
    
    $
    8,533
    
    
    $
    5,260
    
    
    $
    9,024
    
    
    $
    
    
    
    $
    50,883Period-end amount allocated to:Loans individually
evaluated for impairment
    
    $
    7,509
    
    
    $
    3,360
    
    
    $
    
    
    
    $
    2,575
    
    
    $
    
    
    
    $
    13,444Loans collectively
evaluated for impairment
    
    
    20,557
    
    
    
    5,173
    
    
    
    5,260
    
    
    
    6,449
    
    
    
    
    
    
    
    37,439Ending balance
    
    $
    28,066
    
    
    $
    8,533
    
    
    $
    5,260
    
    
    $
    9,024
    
    
    $
    
    
    
    $
    50,883Period-end balances:Loans individually
evaluated for impairment**
    
    $
    101,410
    
    
    $
    47,054
    
    
    $
    1,547
    
    
    $
    6,444
    
    
    $
    
    
    
    $
    156,455Loans collectively
evaluated for impairment
    
    
    1,148,315
    
    
    
    76,606
    
    
    
    277,906
    
    
    
    39,860
    
    
    
    
    
    
    
    1,542,687Ending balance
    
    $
    1,249,725
    
    
    $
    123,660
    
    
    $
    279,453
    
    
    $
    46,304
    
    
    $
    
    
    
    $
    1,699,142
 **
    
    Revised to include impaired loans without specific allocations.
  As of or for
    
    
    As of or forthe three
    
    
    the three
    
    
    As of or formonths
    
    
    months
    
    
    the yearended
    
    
    ended
    
    
    endedMarch 31,
    
    
    March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    2010(Dollars in thousands)Impaired loans on which no specific valuation allowance was provided
    
    $
    85,709
    
    
    $
    97,340
    
    
    $
    71,853Impaired loans on which specific valuation allowance was provided
    
    
    83,889
    
    
    
    51,617
    
    
    
    84,602Total impaired loans at end of period
    
    $
    169,598
    
    
    $
    148,957
    
    
    $
    156,455Specific valuation allowances on impaired loans at year-end
    
    
    12,261
    
    
    
    9,040
    
    
    
    13,444Average impaired loans during year
    
    
    163,028
    
    
    
    133,881
    
    
    
    144,977Interest income recognized on impaired loans during the year
    
    
    702
    
    
    
    294
    
    
    
    1,778Interest income received on impaired loans during the year
    
    
    1,215
    
    
    
    294
    
    
    
    4,570
  13




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##### Table of Contents



Impaired Loans(Dollars in thousands)AllowanceUnpaid
    
    
    
    
    
    
    for Loan
    
    
    Average
    
    
    Interest
    
    
    Cash BasisPrincipal
    
    
    Recorded
    
    
    Losses
    
    
    Recorded
    
    
    Income
    
    
    IncomeBalance
    
    
    Investment
    
    
    Allocated
    
    
    Investment
    
    
    Recognized
    
    
    RecognizedWith no specific allowance recordedPermanent real estateOne-to four-family
residential
    
    $
    32,380
    
    
    $
    26,895
    
    
    $
    217
    
    
    $
    25,702
    
    
    $
    121
    
    
    $
    175Multifamily residential
    
    
    2,921
    
    
    
    2,491
    
    
    
    
    
    
    
    2,633
    
    
    
    
    
    
    
    43Nonresidential
    
    
    35,974
    
    
    
    27,775
    
    
    
    
    
    
    
    19,924
    
    
    
    93
    
    
    
    244Land
    
    
    7,872
    
    
    
    6,311
    
    
    
    63
    
    
    
    5,810
    
    
    
    11
    
    
    
    22Total
    
    
    79,147
    
    
    
    63,472
    
    
    
    280
    
    
    
    54,069
    
    
    
    225
    
    
    
    484Construction loansOne-to four-family
residential
    
    
    28,341
    
    
    
    18,719
    
    
    
    71
    
    
    
    20,901
    
    
    
    27
    
    
    
    87Multifamily and
nonresidential
    
    
    707
    
    
    
    382
    
    
    
    
    
    
    
    382
    
    
    
    
    
    
    
    Total
    
    
    29,048
    
    
    
    19,101
    
    
    
    71
    
    
    
    21,283
    
    
    
    27
    
    
    
    87Consumer loansHome Equity
    
    
    2,904
    
    
    
    1,250
    
    
    
    
    
    
    
    1344
    
    
    
    2
    
    
    
    9Auto
    
    
    87
    
    
    
    69
    
    
    
    5
    
    
    
    62
    
    
    
    
    
    
    
    2Marine
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    113
    
    
    
    47
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    1Other
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    Total
    
    
    3,111
    
    
    
    1,373
    
    
    
    5
    
    
    
    1,460
    
    
    
    2
    
    
    
    12Commercial loansSecured
    
    
    3,639
    
    
    
    1,510
    
    
    
    48
    
    
    
    1,583
    
    
    
    7
    
    
    
    8Unsecured
    
    
    12,171
    
    
    
    253
    
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    10Total
    
    
    15,810
    
    
    
    1,763
    
    
    
    48
    
    
    
    1,969
    
    
    
    7
    
    
    
    18Total
    
    $
    127,116
    
    
    $
    85,709
    
    
    $
    404
    
    
    $
    78,781
    
    
    $
    261
    
    
    $
    601
  14




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##### Table of Contents



Impaired Loans(Dollars in thousands)AllowanceUnpaid
    
    
    
    
    
    
    for Loan
    
    
    Average
    
    
    Interest
    
    
    Cash BasisPrincipal
    
    
    Recorded
    
    
    Losses
    
    
    Recorded
    
    
    Income
    
    
    IncomeBalance
    
    
    Investment
    
    
    Allocated
    
    
    Investment
    
    
    Recognized
    
    
    RecognizedWith a specific allowance recordedPermanent real estateOne-to four-family
residential
    
    $
    1,278
    
    
    $
    1,073
    
    
    $
    160
    
    
    $
    1,029
    
    
    $
    
    
    
    $
    9Multifamily residential
    
    
    7,529
    
    
    
    6,283
    
    
    
    1,065
    
    
    
    7,498
    
    
    
    
    
    
    
    10Nonresidential
    
    
    36,938
    
    
    
    34,605
    
    
    
    3,708
    
    
    
    40,696
    
    
    
    264
    
    
    
    367Land
    
    
    1,127
    
    
    
    590
    
    
    
    136
    
    
    
    425
    
    
    
    
    
    
    
    4Total
    
    
    46,872
    
    
    
    42,551
    
    
    
    5,069
    
    
    
    49,648
    
    
    
    264
    
    
    
    390Construction loansOne-to four-family
residential
    
    
    42,874
    
    
    
    28,586
    
    
    
    3,334
    
    
    
    26,088
    
    
    
    59
    
    
    
    94Multifamily and
nonresidential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    42,874
    
    
    
    28,586
    
    
    
    3,334
    
    
    
    26,088
    
    
    
    59
    
    
    
    94Consumer loansHome Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Auto
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Marine
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial loansSecured
    
    
    11,526
    
    
    
    9,587
    
    
    
    1,626
    
    
    
    5,051
    
    
    
    118
    
    
    
    118Unsecured
    
    
    3,166
    
    
    
    3,165
    
    
    
    2,232
    
    
    
    3,460
    
    
    
    
    
    
    
    12Total
    
    
    14,692
    
    
    
    12,752
    
    
    
    3,858
    
    
    
    8,511
    
    
    
    118
    
    
    
    130Total
    
    
    104,438
    
    
    
    83,889
    
    
    
    12,261
    
    
    
    84,247
    
    
    
    441
    
    
    
    614Total
    
    $
    231,554
    
    
    $
    169,598
    
    
    $
    12,665
    
    
    $
    163,028
    
    
    $
    702
    
    
    $
    1,215
  15




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##### Table of Contents



Impaired Loans(Dollars in thousands)AllowanceUnpaid
    
    
    
    
    
    
    for LoanPrincipal
    
    
    Recorded
    
    
    LossesBalance
    
    
    Investment
    
    
    AllocatedWith no specific allowance recordedPermanent real estate
    
    $
    60,516
    
    
    $
    44,666
    
    
    $
    Construction loans
    
    
    31,715
    
    
    
    23,465
    
    
    
    Consumer loans
    
    
    3,407
    
    
    
    1,547
    
    
    
    Commercial loans
    
    
    16,148
    
    
    
    2,175
    
    
    
    Total
    
    
    111,786
    
    
    
    71,853
    
    
    
    With a specific allowance recordedPermanent real estate
    
    
    65,869
    
    
    
    56,744
    
    
    
    7,509Construction loans
    
    
    35,777
    
    
    
    23,589
    
    
    
    3,360Consumer loans
    
    
    
    
    
    
    
    
    
    
    Commercial loans
    
    
    5,419
    
    
    
    4,269
    
    
    
    2,575Total
    
    
    107,065
    
    
    
    84,602
    
    
    
    13,444Total
    
    $
    218,851
    
    
    $
    156,455
    
    
    $
    13,444
   16




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##### Table of Contents



Nonaccrual Loans and Loans Past Due Over 90 Days and Still AccruingAs of March 31, 2011(Dollars in thousands)Loans past dueover 90 daysand stillNonaccrual
    
    
    accruingReal Estate LoansPermanentOne-to four-family residential
    
    $
    29,062
    
    
    $
    Multifamily residential
    
    
    8,239
    
    
    
    Nonresidential
    
    
    37,353
    
    
    
    Land
    
    
    6,721
    
    
    
    Total
    
    
    81,375
    
    
    
    Construction LoansOne-to four-family residential
    
    
    43,272
    
    
    
    2,868Multifamily and nonresidential
    
    
    382
    
    
    
    Total
    
    
    43,654
    
    
    
    2,868Consumer LoansHome Equity
    
    
    3,122
    
    
    
    Auto
    
    
    114
    
    
    
    Marine
    
    
    
    
    
    
    Recreational vehicle
    
    
    982
    
    
    
    Other
    
    
    6
    
    
    
    Total
    
    
    4,224
    
    
    
    Commercial LoansSecured
    
    
    10,359
    
    
    
    Unsecured
    
    
    3,376
    
    
    
    Total
    
    
    13,735
    
    
    
    Total
    
    $
    142,988
    
    
    $
    2,868
  17




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##### Table of Contents



Nonaccrual Loans and Loans Past Due Over 90 Days and Still AccruingAs
of December 31, 2010(Dollars in thousands)Loans past dueover 90 daysand stillNonaccrual
    
    
    accruingReal Estate LoansPermanentOne-to four-family residential
    
    $
    27,417
    
    
    $
    Multifamily residential
    
    
    10,983
    
    
    
    Nonresidential
    
    
    39,838
    
    
    
    Land
    
    
    5,188
    
    
    
    Total
    
    
    83,426
    
    
    
    Construction LoansOne-to four-family residential
    
    
    40,077
    
    
    
    3,944Multifamily and nonresidential
    
    
    382
    
    
    
    2,032Total
    
    
    40,459
    
    
    
    5,976Consumer LoansHome Equity
    
    
    3,179
    
    
    
    210Auto
    
    
    89
    
    
    
    Marine
    
    
    
    
    
    
    Recreational vehicle
    
    
    93
    
    
    
    144Other
    
    
    10
    
    
    
    Total
    
    
    3,371
    
    
    
    354Commercial LoansSecured
    
    
    1,822
    
    
    
    Unsecured
    
    
    4,123
    
    
    
    Total
    
    
    5,945
    
    
    
    Total
    
    $
    133,201
    
    
    $
    6,330
  18




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##### Table of Contents



Past Due Loans(Dollars in thousands)Greater30-59
    
    
    60-89
    
    
    than 90Days Past
    
    
    Days Past
    
    
    Days Past
    
    
    Total Past
    
    
    Current
    
    
    TotalDue
    
    
    Due
    
    
    Due
    
    
    Due
    
    
    Loans
    
    
    LoansReal Estate LoansPermanentOne-to four-family
residential
    
    $
    4,610
    
    
    $
    1,083
    
    
    $
    24,646
    
    
    $
    30,339
    
    
    $
    731,726
    
    
    $
    762,065Multifamily residential
    
    
    124
    
    
    
    251
    
    
    
    6,911
    
    
    
    7,286
    
    
    
    123,960
    
    
    
    131,246Nonresidential
    
    
    3,773
    
    
    
    8,647
    
    
    
    28,207
    
    
    
    40,627
    
    
    
    288,145
    
    
    
    328,772Land
    
    
    1,331
    
    
    
    423
    
    
    
    4,824
    
    
    
    6,578
    
    
    
    19,046
    
    
    
    25,624Total
    
    
    9,838
    
    
    
    10,404
    
    
    
    64,588
    
    
    
    84,830
    
    
    
    1,162,877
    
    
    
    1,247,707Construction LoansOne-to four-family
residential
    
    
    5,970
    
    
    
    
    
    
    
    43,566
    
    
    
    49,536
    
    
    
    38,539
    
    
    
    88,075Multifamily and
nonresidential
    
    
    942
    
    
    
    
    
    
    
    382
    
    
    
    1,324
    
    
    
    9,877
    
    
    
    11,201Total
    
    
    6,912
    
    
    
    
    
    
    
    43,948
    
    
    
    50,860
    
    
    
    48,416
    
    
    
    99,276Consumer LoansHome Equity
    
    
    2,430
    
    
    
    195
    
    
    
    2,111
    
    
    
    4,736
    
    
    
    211,650
    
    
    
    216,386Auto
    
    
    100
    
    
    
    2
    
    
    
    80
    
    
    
    182
    
    
    
    10,997
    
    
    
    11,179Marine
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    698
    
    
    
    6,109
    
    
    
    6,807Recreational vehicle
    
    
    2,583
    
    
    
    591
    
    
    
    391
    
    
    
    3,565
    
    
    
    30,501
    
    
    
    34,066Other
    
    
    33
    
    
    
    
    
    
    
    7
    
    
    
    40
    
    
    
    4,000
    
    
    
    4,040Total
    
    
    5,844
    
    
    
    788
    
    
    
    2,589
    
    
    
    9,221
    
    
    
    263,257
    
    
    
    272,478Commercial LoansSecured
    
    
    155
    
    
    
    8,706
    
    
    
    1,617
    
    
    
    10,478
    
    
    
    21,096
    
    
    
    31,574Unsecured
    
    
    91
    
    
    
    
    
    
    
    2,831
    
    
    
    2,922
    
    
    
    11,276
    
    
    
    14,198Total
    
    
    246
    
    
    
    8,706
    
    
    
    4,448
    
    
    
    13,400
    
    
    
    32,372
    
    
    
    45,772Total
    
    $
    22,840
    
    
    $
    19,898
    
    
    $
    115,573
    
    
    $
    158,311
    
    
    $
    1,506,922
    
    
    $
    1,665,233
  19




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##### Table of Contents



Past Due Loans(Dollars in thousands)Greater30-59
    
    
    60-89
    
    
    than 90Days Past
    
    
    Days Past
    
    
    Days Past
    
    
    Total Past
    
    
    Current
    
    
    TotalDue
    
    
    Due
    
    
    Due
    
    
    Due
    
    
    Loans
    
    
    LoansReal Estate LoansPermanentOne-to four-family
residential
    
    $
    6,620
    
    
    $
    2,351
    
    
    $
    24,914
    
    
    $
    33,885
    
    
    $
    723,541
    
    
    $
    757,426Multifamily residential
    
    
    326
    
    
    
    
    
    
    
    9,898
    
    
    
    10,224
    
    
    
    125,547
    
    
    
    135,771Nonresidential
    
    
    1,888
    
    
    
    13,146
    
    
    
    30,382
    
    
    
    45,416
    
    
    
    285,974
    
    
    
    331,390Land
    
    
    12
    
    
    
    426
    
    
    
    5,188
    
    
    
    5,626
    
    
    
    19,512
    
    
    
    25,138Total
    
    
    8,846
    
    
    
    15,923
    
    
    
    70,382
    
    
    
    95,151
    
    
    
    1,154,574
    
    
    
    1,249,725Construction LoansOne-to four-family
residential
    
    
    3,688
    
    
    
    7,579
    
    
    
    42,855
    
    
    
    54,122
    
    
    
    54,461
    
    
    
    108,583Multifamily and
nonresidential
    
    
    
    
    
    
    
    
    
    
    2,414
    
    
    
    2,414
    
    
    
    12,663
    
    
    
    15,077Total
    
    
    3,688
    
    
    
    7,579
    
    
    
    45,269
    
    
    
    56,536
    
    
    
    67,124
    
    
    
    123,660Consumer LoansHome Equity
    
    
    2,003
    
    
    
    880
    
    
    
    2,519
    
    
    
    5,402
    
    
    
    215,180
    
    
    
    220,582Auto
    
    
    194
    
    
    
    56
    
    
    
    87
    
    
    
    337
    
    
    
    11,188
    
    
    
    11,525Marine
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    7,224
    
    
    
    7,285Recreational vehicle
    
    
    1,693
    
    
    
    618
    
    
    
    188
    
    
    
    2,499
    
    
    
    33,172
    
    
    
    35,671Other
    
    
    25
    
    
    
    10
    
    
    
    9
    
    
    
    44
    
    
    
    4,346
    
    
    
    4,390Total
    
    
    3,976
    
    
    
    1,564
    
    
    
    2,803
    
    
    
    8,343
    
    
    
    271,110
    
    
    
    279,453Commercial LoansSecured
    
    
    163
    
    
    
    
    
    
    
    1,822
    
    
    
    1,985
    
    
    
    26,891
    
    
    
    28,876Unsecured
    
    
    43
    
    
    
    
    
    
    
    3,554
    
    
    
    3,597
    
    
    
    13,831
    
    
    
    17,428Total
    
    
    206
    
    
    
    
    
    
    
    5,376
    
    
    
    5,582
    
    
    
    40,722
    
    
    
    46,304Total
    
    $
    16,716
    
    
    $
    25,066
    
    
    $
    123,830
    
    
    $
    165,612
    
    
    $
    1,533,530
    
    
    $
    1,699,142
  Credit Quality Indicators:
   Special Mention.
  20




---



##### Table of Contents



Substandard.
 Doubtful.
 Loss.
   21




---



##### Table of Contents



(Dollars in thousands)
 Unclassified
    
    
    ClassifiedSpecial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalUnclassified
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    Loss
    
    
    Classified
    
    
    Total LoansReal Estate LoansPermanentOne-to four-family
residential
    
    $
    726,188
    
    
    $
    2,966
    
    
    $
    32,911
    
    
    $
    
    
    
    $
    
    
    
    $
    32,911
    
    
    $
    762,065Multifamily
residential
    
    
    105,032
    
    
    
    6,858
    
    
    
    19,356
    
    
    
    
    
    
    
    
    
    
    
    19,356
    
    
    
    131,246Nonresidential
    
    
    197,896
    
    
    
    60,583
    
    
    
    70,293
    
    
    
    
    
    
    
    
    
    
    
    70,293
    
    
    
    328,772Land
    
    
    9,250
    
    
    
    1,074
    
    
    
    15,300
    
    
    
    
    
    
    
    
    
    
    
    15,300
    
    
    
    25,624Total
    
    
    1,038,366
    
    
    
    71,481
    
    
    
    137,860
    
    
    
    
    
    
    
    
    
    
    
    137,860
    
    
    
    1,247,707Construction LoansOne-to four-family
residential
    
    
    35,062
    
    
    
    5,636
    
    
    
    47,348
    
    
    
    29
    
    
    
    
    
    
    
    47,377
    
    
    
    88,075Multifamily and
nonresidential
    
    
    386
    
    
    
    10,433
    
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    382
    
    
    
    11,201Total
    
    
    35,448
    
    
    
    16,069
    
    
    
    47,730
    
    
    
    29
    
    
    
    
    
    
    
    47,759
    
    
    
    99,276Consumer LoansHome Equity
    
    
    213,019
    
    
    
    21
    
    
    
    3,346
    
    
    
    
    
    
    
    
    
    
    
    3,346
    
    
    
    216,386Auto
    
    
    11,059
    
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    11,179Marine
    
    
    6,807
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807Recreational vehicle
    
    
    33,068
    
    
    
    
    
    
    
    998
    
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    34,066Other
    
    
    4,026
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    4,040Total
    
    
    267,979
    
    
    
    21
    
    
    
    4,478
    
    
    
    
    
    
    
    
    
    
    
    4,478
    
    
    
    272,478Commercial LoansSecured
    
    
    17,989
    
    
    
    818
    
    
    
    12,181
    
    
    
    586
    
    
    
    
    
    
    
    12,767
    
    
    
    31,574Unsecured
    
    
    6,758
    
    
    
    2,175
    
    
    
    3,600
    
    
    
    1,665
    
    
    
    
    
    
    
    5,265
    
    
    
    14,198Total
    
    
    24,747
    
    
    
    2,993
    
    
    
    15,781
    
    
    
    2,251
    
    
    
    
    
    
    
    18,032
    
    
    
    45,772Total
    
    $
    1,366,540
    
    
    $
    90,564
    
    
    $
    205,849
    
    
    $
    2,280
    
    
    $
    
    
    
    $
    208,129
    
    
    $
    1,665,233
  22




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##### Table of Contents



(Dollars in thousands)
 Unclassified
    
    
    ClassifiedSpecial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalUnclassified
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    Loss
    
    
    Classified
    
    
    Total LoansReal Estate LoansPermanentOne-to four-family
residential
    
    $
    723,814
    
    
    $
    2,404
    
    
    $
    31,208
    
    
    $
    
    
    
    $
    
    
    
    $
    31,208
    
    
    $
    757,426Multifamily
residential
    
    
    106,839
    
    
    
    6,900
    
    
    
    22,032
    
    
    
    
    
    
    
    
    
    
    
    22,032
    
    
    
    135,771Nonresidential
    
    
    200,816
    
    
    
    55,197
    
    
    
    75,377
    
    
    
    
    
    
    
    
    
    
    
    75,377
    
    
    
    331,390Land
    
    
    9,677
    
    
    
    1,100
    
    
    
    14,361
    
    
    
    
    
    
    
    
    
    
    
    14,361
    
    
    
    25,138Total
    
    
    1,041,146
    
    
    
    65,601
    
    
    
    142,978
    
    
    
    
    
    
    
    
    
    
    
    142,978
    
    
    
    1,249,725Construction LoansOne-to four-family
residential
    
    
    47,308
    
    
    
    6,122
    
    
    
    55,021
    
    
    
    132
    
    
    
    
    
    
    
    55,153
    
    
    
    108,583Multifamily and
nonresidential
    
    
    1,091
    
    
    
    13,604
    
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    382
    
    
    
    15,077Total
    
    
    48,399
    
    
    
    19,726
    
    
    
    55,403
    
    
    
    132
    
    
    
    
    
    
    
    55,535
    
    
    
    123,660Consumer LoansHome Equity
    
    
    216,994
    
    
    
    
    
    
    
    3,588
    
    
    
    
    
    
    
    
    
    
    
    3,588
    
    
    
    220,582Auto
    
    
    11,420
    
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    105
    
    
    
    11,525Marine
    
    
    7,285
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,285Recreational vehicle
    
    
    35,430
    
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    
    
    
    
    241
    
    
    
    35,671Other
    
    
    4,375
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    4,390Total
    
    
    275,504
    
    
    
    
    
    
    
    3,949
    
    
    
    
    
    
    
    
    
    
    
    3,949
    
    
    
    279,453Commercial LoansSecured
    
    
    14,608
    
    
    
    1,327
    
    
    
    12,134
    
    
    
    807
    
    
    
    
    
    
    
    12,941
    
    
    
    28,876Unsecured
    
    
    9,327
    
    
    
    2,132
    
    
    
    4,304
    
    
    
    1,665
    
    
    
    
    
    
    
    5,969
    
    
    
    17,428Total
    
    
    23,935
    
    
    
    3,459
    
    
    
    16,438
    
    
    
    2,472
    
    
    
    
    
    
    
    18,910
    
    
    
    46,304Total
    
    $
    1,388,984
    
    
    $
    88,786
    
    
    $
    218,768
    
    
    $
    2,604
    
    
    $
    
    
    
    $
    221,372
    
    
    $
    1,699,142
  23




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##### Table of Contents



7. MORTGAGE BANKING ACTIVITIES
   Three Months Ended
    
    
    Year EndedMarch 31, 2011
    
    
    December 31, 2010(Dollars in thousands)Balance, beginning of year
    
    $
    6,400
    
    
    $
    6,228Originations
    
    
    433
    
    
    
    2,621Amortized to expense
    
    
    (529
    )
    
    
    (2,449
    )Balance, end of period
    
    
    6,304
    
    
    
    6,400Less valuation allowance
    
    
    (144
    )
    
    
    (285
    )Net balance
    
    $
    6,160
    
    
    $
    6,115
  Three Months Ended
    
    
    Year EndedMarch 31, 2011
    
    
    December 31, 2010(Dollars in thousands)Balance, beginning of year
    
    $
    (285
    )
    
    $
    (423
    )Impairment charges
    
    
    
    
    
    
    (1,279
    )Recoveries
    
    
    141
    
    
    
    1,417Balance, end of period
    
    $
    (144
    )
    
    $
    (285
    )
   March 31,
    
    
    December 31,2011
    
    
    2010Weighted average prepayment rate
    
    
    307 PSA
    
    
    
    322 PSAWeighted average life (in years)
    
    
    3.66
    
    
    
    3.71Weighted average discount rate
    
    
    8
    %
    
    
    8
    %
  24




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##### Table of Contents



8. OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
  March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Real estate owned and other repossessed assets
    
    $
    49,577
    
    
    $
    47,668Valuation allowance
    
    
    (6,704
    )
    
    
    (7,332
    )End of period
    
    $
    42,873
    
    
    $
    40,336
  March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Beginning of year
    
    $
    7,332
    
    
    $
    7,867Additions charged to expense
    
    
    582
    
    
    
    4,572Direct write-downs
    
    
    (1,210
    )
    
    
    (5,107
    )End of period
    
    $
    6,704
    
    
    $
    7,332
  For the three months ended March 31,2011
    
    
    2010(Dollars in thousands)Net loss on sales
    
    $
    410
    
    
    $
    100Provision for unrealized losses, net
    
    
    582
    
    
    
    1,384Operating expenses, net of rental income
    
    
    873
    
    
    
    607Total expenses
    
    $
    1,865
    
    
    $
    2,091
  25




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##### Table of Contents



9. OTHER POSTRETIREMENT BENEFIT PLANS
   Three Months Ended March 31,2011
    
    
    2010(In thousands)Service cost
    
    $
    
    
    
    $
    Interest cost
    
    
    33
    
    
    
    47Expected return on plan assets
    
    
    
    
    
    
    Net amortization of prior service cost
    
    
    
    
    
    
    Recognized net actuarial gain
    
    
    (19
    )
    
    
    Net periodic benefit cost
    
    $
    14
    
    
    $
    47Assumptions used in the valuations were as follows:Weighted average discount rate
    
    
    5.00
    %
    
    
    5.75
    %
 10. FAIR VALUE MEASUREMENT
      Available for sale securities
 Impaired loans:
 Foreclosed assets:
  26




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##### Table of Contents



Mortgage servicing rights:
 Loans held for sale:
 Assets and Liabilities Measured on a Recurring Basis:
 Fair Value Measurements at March 31, 2011 Using:QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Available for sale securitiesUS Treasury and government
sponsored entities securities
    
    $
    62,865
    
    
    $
    
    
    
    $
    62,865
    
    
    $
    Equity securities
    
    
    327
    
    
    
    327
    
    
    
    
    
    
    
    Mortgage-backed GSE securities: residential
    
    
    226,196
    
    
    
    
    
    
    
    226,196
    
    
    
    Fair Value Measurements at December 31, 2010 Using:QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Available for sale securitiesUS Treasury and government
sponsored entities securities
    
    $
    62,935
    
    
    $
    
    
    
    $
    62,935
    
    
    $
    Equity securities
    
    
    394
    
    
    
    394
    
    
    
    
    
    
    
    Mortgage-backed GSE securities: residential
    
    
    298,713
    
    
    
    
    
    
    
    298,713
    
    
    
    
  27




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##### Table of Contents



Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements at March 31, 2011 Using:Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loansPermanent real estate loans
    
    $
    37,482
    
    
    $
    
    
    
    $
    
    
    
    $
    37,482Construction loans
    
    
    25,252
    
    
    
    
    
    
    
    
    
    
    
    25,252Commercial loans
    
    
    8,894
    
    
    
    
    
    
    
    
    
    
    
    8,894Mortgage servicing assets
    
    
    2,201
    
    
    
    
    
    
    
    2,201
    
    
    
    Foreclosed assetsPermanent real estate loans
    
    
    3,771
    
    
    
    
    
    
    
    
    
    
    
    3,771Construction loans
    
    
    10,201
    
    
    
    
    
    
    
    
    
    
    
    10,201Fair Value Measurements at December 31, 2010 Using:Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loansPermanent real estate loans
    
    $
    49,235
    
    
    $
    
    
    
    $
    
    
    
    $
    49,235Construction loans
    
    
    20,229
    
    
    
    
    
    
    
    
    
    
    
    20,229Commercial loans
    
    
    1,694
    
    
    
    
    
    
    
    
    
    
    
    1,694Loans held for sale
    
    
    10,845
    
    
    
    
    
    
    
    10,845
    
    
    
    Mortgage servicing assets
    
    
    2,278
    
    
    
    
    
    
    
    2,278
    
    
    
    Foreclosed assetsPermanent real estate loans
    
    
    3,930
    
    
    
    
    
    
    
    
    
    
    
    3,930Construction loans
    
    
    10,527
    
    
    
    
    
    
    
    
    
    
    
    10,527
    28




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    Value(Dollars in thousands)Assets:Cash and cash equivalents
    
    $
    38,678
    
    
    $
    38,678
    
    
    $
    37,107
    
    
    $
    37,107Available for sale securities
    
    
    289,388
    
    
    
    289,388
    
    
    
    362,042
    
    
    
    362,042Loans held for sale
    
    
    2,531
    
    
    
    2,543
    
    
    
    10,870
    
    
    
    10,870Loans, net
    
    
    1,620,094
    
    
    
    1,642,289
    
    
    
    1,649,486
    
    
    
    1,675,610Federal Home Loan Bank stock
    
    
    26,464
    
    
    
    n/a
    
    
    
    26,464
    
    
    
    n/aAccrued interest receivable
    
    
    7,684
    
    
    
    7,684
    
    
    
    7,720
    
    
    
    7,720Liabilities:Deposits:Checking, savings and money market accounts
    
    
    (807,763
    )
    
    
    (807,763
    )
    
    
    (779,301
    )
    
    
    (779,301
    )Certificates of deposit
    
    
    (904,760
    )
    
    
    (919,854
    )
    
    
    (910,480
    )
    
    
    (925,325
    )Federal Home Loan Bank advances
    
    
    (100,954
    )
    
    
    (107,623
    )
    
    
    (202,818
    )
    
    
    (210,497
    )Repurchase agreements and other
    
    
    (100,446
    )
    
    
    (109,485
    )
    
    
    (97,797
    )
    
    
    (107,299
    )Advance payments by borrowers for taxes
and insurance
    
    
    (13,219
    )
    
    
    (13,219
    )
    
    
    (20,668
    )
    
    
    (20,668
    )Accrued interest payable
    
    
    (905
    )
    
    
    (905
    )
    
    
    (809
    )
    
    
    (809
    )
 Fair value of financial instruments:
  Cash and cash equivalents, accrued interest receivable and payable and advance payments by
borrowers for taxes and insurance
 Securities
 Loans held for sale
 Loans
 Federal Home Loan Bank stock
 Deposits
 Borrowed funds
  29




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##### Table of Contents



Limitations
  11. STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE
  For the three months endedMarch 31, 2011
    
    
    March 31, 2010(Dollars in thousands)Supplemental disclosures of cash flow informationCash paid during the period for:Interest on deposits and borrowings
    
    $
    7,982
    
    
    $
    10,759Supplemental schedule of noncash activities:Transfers from loans to real estate owned and other repossessed assets
    
    
    8,507
    
    
    
    8,119Transfers from available for sale securities to other assets
    
    
    24,395
    
    
    
    
 12. SEGMENT INFORMATION
   30




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##### Table of Contents



13. EARNINGS PER SHARE
  Three Months EndedMarch 31,2011
    
    
    2010Numerator:Net income (loss)
    
    $
    2,962
    
    
    $
    (5,142
    )Denominator:Weighted average common shares outstandingbasic
    
    
    30,917
    
    
    
    29,955Dilutive effect of stock options
    
    
    2
    
    
    
    Weighted average common shares outstandingdilutive
    
    
    30,919
    
    
    
    29,955Basic earnings (loss) per share:
    
    
    0.10
    
    
    
    (0.17
    )Dilutive earnings (loss) per share:
    
    
    0.10
    
    
    
    (0.17
    )
 14. OTHER COMPREHENSIVE INCOME (LOSS)
   Three months endedMarch 31,
    
    
    March 31,2011
    
    
    2010(Dollars in thousands)Unrealized holding gain (loss) on securities available for sale
    
    $
    (470
    )
    
    $
    2,188Reclassification adjustment for gains realized in income
    
    
    (1,303
    )
    
    
    (2,843
    )Net unrealized losses
    
    
    (1,773
    )
    
    
    (655
    )Tax effect (35%)
    
    
    
    
    
    
    230Net of tax amount
    
    $
    (1,773
    )
    
    $
    (425
    )
  CurrentBalance at
    
    
    Period
    
    
    Balance atDecember 31, 2010
    
    
    Change
    
    
    March 31, 2011Unrealized losses on securities available for sale
    
    $
    (5,673
    )
    
    $
    (1,773
    )
    
    $
    (7,446
    )Unrealized gains on post-retirement benefits
    
    
    895
    
    
    
    
    
    
    
    895Total
    
    $
    (4,778
    )
    
    $
    (1,773
    )
    
    $
    (6,551
    )
  31




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##### Table of Contents



15. REGULATORY CAPITAL REQUIREMENTS
   As of March 31, 2011Minimum CapitalActual
    
    
    Requirements Per Bank OrderAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Total risk-based capital to risk-weighted assets
    
    $
    200,898
    
    
    
    13.02
    %
    
    $
    185,219
    
    
    
    12.00
    %Tier 1 capital to risk-weighted assets
    
    
    181,269
    
    
    
    11.74
    %
    
    
    *
    
    
    
    *Tier 1 capital to average total assets
    
    
    181,269
    
    
    
    8.44
    %
    
    
    171,755
    
    
    
    8.00
    %
 As of March 31, 2011To Be Well Capitalized UnderMinimum Capital
    
    
    Prompt Corrective ActionRequirements Per Regulation
    
    
    ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Total risk-based capital to risk-weighted assets
    
    $
    123,479
    
    
    
    8.00
    %
    
    $
    154,349
    
    
    
    10.00
    %Tier 1 capital to risk-weighted assets
    
    
    *
    
    
    
    *
    
    
    
    92,610
    
    
    
    6.00
    %Tier 1 capital to average total assets
    
    
    85,877
    
    
    
    4.00
    %
    
    
    107,347
    
    
    
    5.00
    %
 As of December 31, 2010Minimum CapitalActual
    
    
    Requirements Per Bank OrderAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Total risk-based capital to risk-weighted assets
    
    $
    197,891
    
    
    
    12.54
    %
    
    $
    189,412
    
    
    
    12.00
    %Tier 1 capital to risk-weighted assets
    
    
    177,776
    
    
    
    11.26
    %
    
    
    *
    
    
    
    *Tier 1 capital to average total assets
    
    
    177,776
    
    
    
    7.84
    %
    
    
    181,513
    
    
    
    8.00
    %
 As of December 31, 2010To Be Well Capitalized UnderMinimum Capital
    
    
    Prompt Corrective ActionRequirements Per Regulation
    
    
    ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Total risk-based capital to risk-weighted assets
    
    $
    126,274
    
    
    
    8.00
    %
    
    $
    157,843
    
    
    
    10.00
    %Tier 1 capital to risk-weighted assets
    
    
    *
    
    
    
    *
    
    
    
    94,706
    
    
    
    6.00
    %Tier 1 capital to average total assets
    
    
    90,757
    
    
    
    4.00
    %
    
    
    113,446
    
    
    
    5.00
    %
 *
    
    Amount/Ratio is not required under the Bank Order or regulations.
  32




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16. INCOME TAXES
   33




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 UNITED COMMUNITY FINANCIAL CORP.
 At or For the ThreeMonths EndedMarch 31,2011
    
    
    2010Selected financial ratios and other data: (1)Performance ratios:Return on average assets (2)
    
    
    0.55
    %
    
    
    -0.90
    %Return on average equity (3)
    
    
    6.56
    %
    
    
    -9.18
    %Interest rate spread (4)
    
    
    3.30
    %
    
    
    3.00
    %Net interest margin (5)
    
    
    3.50
    %
    
    
    3.28
    %Noninterest expense to average assets
    
    
    3.07
    %
    
    
    2.96
    %Efficiency ratio (6)
    
    
    77.12
    %
    
    
    78.59
    %Average interest-earning assets to average interest-bearing
liabilities
    
    
    112.50
    %
    
    
    113.36
    %Capital ratios:Average equity to average assets
    
    
    8.41
    %
    
    
    9.77
    %Equity to assets, end of period
    
    
    8.39
    %
    
    
    9.41
    %Tier 1 leverage ratio
    
    
    8.44
    %
    
    
    8.47
    %Tier 1 risk-based capital ratio
    
    
    11.74
    %
    
    
    11.47
    %Total risk-based capital ratio
    
    
    13.02
    %
    
    
    12.73
    %Asset quality ratio:Nonperforming loans to total loans at end of period (7)
    
    
    9.00
    %
    
    
    7.60
    %Nonperforming assets to average assets (8)
    
    
    8.78
    %
    
    
    7.59
    %Nonperforming assets to total assets at end of period
    
    
    8.92
    %
    
    
    7.63
    %Allowance for loan losses as a percent of loans
    
    
    2.79
    %
    
    
    2.55
    %Allowance for loan losses as a percent of nonperforming loans (7)
    
    
    31.82
    %
    
    
    34.47
    %Texas ratio (9)
    
    
    84.50
    %
    
    
    66.50
    %Total classified assets as a percent of Tier 1 Capital
    
    
    114.82
    %
    
    
    119.22
    %Net chargeoffs as a percent of average loans
    
    
    1.63
    %
    
    
    1.51
    %Total 90+ days past due as a percent of total loans
    
    
    7.13
    %
    
    
    7.26
    %Office data:Number of full service banking offices
    
    
    38
    
    
    
    38Number of loan production offices
    
    
    7
    
    
    
    6Per share data:Basic earnings (loss) (10)
    
    $
    0.10
    
    
    $
    (0.17
    )Diluted earnings (loss) (10)
    
    
    0.10
    
    
    
    (0.17
    )Book value (11)
    
    
    5.73
    
    
    
    6.94Tangible book value (12)
    
    
    5.72
    
    
    
    6.92
 Notes:1.
    
    Ratios for the three month periods are annualized where appropriate2.
    
    Net income (loss) divided by average total assets3.
    
    Net income (loss) divided by average total equity4.
    
    Difference between weighted average yield on interest-earning assets and weighted average cost of
interest-bearing liabilities5.
    
    Net interest income as a percentage of average interest-earning assets6.
    
    Noninterest expense, excluding the amortization of core deposit intangible, divided by the sum of net
interest income and noninterest income, excluding gains and losses on securities, other than
temporary impairment charges, gains and losses on foreclosed assets, and gain on the sale of a retail
branch7.
    
    Nonperforming loans consist of nonaccrual loans and loans past due ninety days and still accruing8.
    
    Nonperforming assets consist of nonperforming loans and real estate owned and other repossessed assets9.
    
    Nonperforming assets divided by the sum of tangible common equity and the allowance for loan losses10.
    
    Net income (loss) divided by the number of basic or diluted shares outstanding11.
    
    Shareholders equity divided by number of shares outstanding12.
    
    Shareholders equity minus core deposit intangible divided by number of shares outstanding
  34




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##### Table of Contents



Forward Looking Statements
  Comparison of Financial Condition at March 31, 2011 and December 31, 2010
      35




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##### Table of Contents



Allowance For Loan Losses(Dollars in thousands)December 31,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 31,2010
    
    
    Provision
    
    
    Recovery
    
    
    Chargeoff
    
    
    2011Real Estate LoansPermanentOne-to four-family residential
    
    $
    8,139
    
    
    $
    1,829
    
    
    $
    150
    
    
    $
    (1,074
    )
    
    $
    9,044Multifamily residential
    
    
    5,082
    
    
    
    (315
    )
    
    
    79
    
    
    
    (242
    )
    
    
    4,604Nonresidential
    
    
    12,559
    
    
    
    (277
    )
    
    
    1
    
    
    
    (1,039
    )
    
    
    11,244Land
    
    
    2,286
    
    
    
    317
    
    
    
    19
    
    
    
    (523
    )
    
    
    2,099Total
    
    
    28,066
    
    
    
    1,554
    
    
    
    249
    
    
    
    (2,878
    )
    
    
    26,991Construction LoansOne-to four-family residential
    
    
    8,260
    
    
    
    (402
    )
    
    
    57
    
    
    
    (2,352
    )
    
    
    5,563Multifamily and nonresidential
    
    
    273
    
    
    
    (62
    )
    
    
    
    
    
    
    
    
    
    
    211Total
    
    
    8,533
    
    
    
    (464
    )
    
    
    57
    
    
    
    (2,352
    )
    
    
    5,774Consumer LoansHome Equity
    
    
    2,964
    
    
    
    203
    
    
    
    57
    
    
    
    (516
    )
    
    
    2,708Auto
    
    
    104
    
    
    
    (6
    )
    
    
    10
    
    
    
    (3
    )
    
    
    105Marine
    
    
    361
    
    
    
    119
    
    
    
    0
    
    
    
    (223
    )
    
    
    257Recreational vehicle
    
    
    1,519
    
    
    
    337
    
    
    
    17
    
    
    
    (215
    )
    
    
    1,658Other
    
    
    312
    
    
    
    (61
    )
    
    
    90
    
    
    
    (73
    )
    
    
    268Total
    
    
    5,260
    
    
    
    592
    
    
    
    174
    
    
    
    (1,030
    )
    
    
    4,996Commercial LoansSecured
    
    
    2,611
    
    
    
    511
    
    
    
    51
    
    
    
    (391
    )
    
    
    2,782Unsecured
    
    
    6,413
    
    
    
    (1
    )
    
    
    35
    
    
    
    (575
    )
    
    
    5,872Total
    
    
    9,024
    
    
    
    510
    
    
    
    86
    
    
    
    (966
    )
    
    
    8,654Total
    
    $
    50,883
    
    
    $
    2,192
    
    
    $
    566
    
    
    $
    (7,226
    )
    
    $
    46,415
      36




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##### Table of Contents



Impaired Loans  (Dollars in thousands)
 March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    ChangeReal Estate LoansPermanentOne-to four-family residential
    
    $
    27,968
    
    
    $
    25,493
    
    
    $
    2,475Multifamily residential
    
    
    8,775
    
    
    
    11,487
    
    
    
    (2,712
    )Nonresidential
    
    
    62,379
    
    
    
    58,861
    
    
    
    3,518Land
    
    
    6,901
    
    
    
    5,569
    
    
    
    1,332Total
    
    
    106,023
    
    
    
    101,410
    
    
    
    4,613Construction LoansOne-to four-family residential
    
    
    47,305
    
    
    
    46,672
    
    
    
    633Multifamily and nonresidential
    
    
    382
    
    
    
    382
    
    
    
    Total
    
    
    47,687
    
    
    
    47,054
    
    
    
    633Consumer LoansHome Equity
    
    
    1,250
    
    
    
    1,438
    
    
    
    (188
    )Auto
    
    
    69
    
    
    
    55
    
    
    
    14Boat
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    47
    
    
    
    47
    
    
    
    Other
    
    
    7
    
    
    
    7
    
    
    
    Total
    
    
    1,373
    
    
    
    1,547
    
    
    
    (174
    )Commercial LoansSecured
    
    
    11,097
    
    
    
    2,171
    
    
    
    8,926Unsecured
    
    
    3,418
    
    
    
    4,273
    
    
    
    (855
    )Total
    
    
    14,515
    
    
    
    6,444
    
    
    
    8,071Total Impaired Loans
    
    $
    169,598
    
    
    $
    156,455
    
    
    $
    13,143
  37




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##### Table of Contents




    
    Transfer from the borrower to Home Savings of receivables from third parties, real
estate, or other assets to fully or partially satisfy a debt (including a transfer
resulting from foreclosure or repossession).
    
    Issuance or other granting of an equity interest to Home Savings by the borrower to
satisfy fully or partially a debt unless the equity interest is granted pursuant to
existing terms for converting the debt into an equity interest.
    
    Modification of the terms of a debt, such as one or a combination of:
 
    
    Reduction of the stated interest rate for the remaining original life of the debt
    
    Extension of the maturity date or dates at a stated interest rate lower
than the current market rate for new debt with similar risk
    
    Reduction of the face amount or maturity amount of the debt as stated in
the instrument or other agreement and/or
    
    Reduction of accrued interest.
  
    
    the fair value of cash, other assets, or an equity interest accepted by Home Savings
from a borrower in full satisfaction of its receivable at least equals the recorded
investment in the loan;
 
    
    the fair value of cash, other assets, or an equity interest transferred by a borrower to
Home Savings in full settlement of its loan at least equals the carrying amount of the
loan;
 
    
    Home Savings reduces the effective interest rate on the loan primarily to reflect a
decrease in market interest rates in general or a decrease in the risk so as to maintain a
relationship with a borrower that can readily obtain funds from other sources at the
current market interest rate; or
 
    
    Home Savings issues, in exchange for the original loan, a new marketable loan having an
effective interest rate based on its market price that is at or near the current market
interest rates of loans with similar maturity dates and stated interest rates issued by
other banks.
  38




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##### Table of Contents



Troubled Debt Restructurings
  March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    Change(Dollars in thousands)Real Estate LoansPermanentOne-to four-family
    
    $
    12,034
    
    
    $
    10,830
    
    
    $
    1,204Multifamily residential
    
    
    2,411
    
    
    
    2,410
    
    
    
    1Nonresidential
    
    
    22,178
    
    
    
    22,313
    
    
    
    (135
    )Land
    
    
    1,885
    
    
    
    1,344
    
    
    
    541Total
    
    
    38,508
    
    
    
    36,897
    
    
    
    1,611Construction LoansOne-to four-family residential
    
    
    6,683
    
    
    
    6,879
    
    
    
    (196
    )Multifamily and nonresidential
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    6,683
    
    
    
    6,879
    
    
    
    (196
    )Consumer LoansHome Equity
    
    
    108
    
    
    
    347
    
    
    
    (239
    )Auto
    
    
    27
    
    
    
    9
    
    
    
    18Marine
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    7
    
    
    
    7
    
    
    
    Total
    
    
    142
    
    
    
    363
    
    
    
    (221
    )Commercial LoansSecured
    
    
    9,147
    
    
    
    348
    
    
    
    8,799Unsecured
    
    
    69
    
    
    
    84
    
    
    
    (15
    )Total
    
    
    9,216
    
    
    
    432
    
    
    
    8,784Total Restructured Loans
    
    $
    54,549
    
    
    $
    44,571
    
    
    $
    9,978
    39




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##### Table of Contents



Nonperforming Loans  (Dollars in thousands)
 March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    ChangeReal Estate LoansPermanentOne-to four-family residential
    
    $
    29,062
    
    
    $
    27,417
    
    
    $
    1,645Multifamily residential
    
    
    8,239
    
    
    
    10,983
    
    
    
    (2,744
    )Nonresidential
    
    
    37,353
    
    
    
    39,838
    
    
    
    (2,485
    )Land
    
    
    6,722
    
    
    
    5,188
    
    
    
    1,534Total
    
    
    81,376
    
    
    
    83,426
    
    
    
    (2,050
    )Construction LoansOne-to four-family residential
    
    
    46,139
    
    
    
    44,022
    
    
    
    2,117Multifamily and nonresidential
    
    
    382
    
    
    
    2,413
    
    
    
    (2,031
    )Total
    
    
    46,521
    
    
    
    46,435
    
    
    
    86Consumer LoansHome Equity
    
    
    3,122
    
    
    
    3,389
    
    
    
    (267
    )Auto
    
    
    114
    
    
    
    89
    
    
    
    25Marine
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    982
    
    
    
    237
    
    
    
    745Other
    
    
    6
    
    
    
    10
    
    
    
    (4
    )Total
    
    
    4,224
    
    
    
    3,725
    
    
    
    499Commercial LoansSecured
    
    
    10,359
    
    
    
    1,822
    
    
    
    8,537Unsecured
    
    
    3,376
    
    
    
    4,122
    
    
    
    (746
    )Total
    
    
    13,735
    
    
    
    5,944
    
    
    
    7,791Total Nonperforming Loans
    
    $
    145,856
    
    
    $
    139,530
    
    
    $
    6,326
     40




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##### Table of Contents



Real Estate Owned
    
    
    Repossessed Assets
    
    
    Total(In thousands)Balance at December 31, 2010
    
    $
    39,914
    
    
    $
    422
    
    
    $
    40,336Acquisitions
    
    
    8,404
    
    
    
    280
    
    
    
    8,684Sales
    
    
    (5,350
    )
    
    
    (215
    )
    
    
    (5,565
    )Provision for unrealized losses
    
    
    (582
    )
    
    
    
    
    
    
    (582
    )Balance at March 31, 2011
    
    $
    42,386
    
    
    $
    487
    
    
    $
    42,873
  Valuation
    
    
    NetBalance
    
    
    Allowance
    
    
    Balance(In thousands)Real estate ownedOne-to four-family
    
    $
    15,978
    
    
    $
    (178
    )
    
    $
    15,800Multifamily residential
    
    
    2,587
    
    
    
    (32
    )
    
    
    2,555Nonresidential
    
    
    3,244
    
    
    
    (306
    )
    
    
    2,938One-to four-family residential construction
    
    
    26,426
    
    
    
    (6,188
    )
    
    
    20,238Land
    
    
    855
    
    
    
    
    
    
    
    855Total real estate owned
    
    
    49,090
    
    
    
    (6,704
    )
    
    
    42,386Repossessed assetsAuto
    
    
    8
    
    
    
    
    
    
    
    8Marine
    
    
    200
    
    
    
    
    
    
    
    200Recreational vehicle
    
    
    279
    
    
    
    
    
    
    
    279Total repossessed assets
    
    
    487
    
    
    
    
    
    
    
    487Total real estate owned and other repossessed assets
    
    $
    49,577
    
    
    $
    (6,704
    )
    
    $
    42,873
      41




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##### Table of Contents



Comparison of Operating Results for the Three Months Ended
March 31, 2011 and March 31, 2010
 Net Income (Loss).
 Net Interest Income.
    42




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##### Table of Contents



For the Three Months Ended March 31,2011 vs. 2010Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    (360
    )
    
    $
    (2,973
    )
    
    $
    (3,333
    )Loans held for sale
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Investment securities:Available for sale
    
    
    (260
    )
    
    
    522
    
    
    
    262FHLB stock
    
    
    
    
    
    
    
    
    
    
    Other interest-earning assets
    
    
    2
    
    
    
    
    
    
    
    2Total interest-earning assets
    
    $
    (618
    )
    
    $
    (2,455
    )
    
    $
    (3,073
    )Interest-bearing liabilities:Savings accounts
    
    
    (63
    )
    
    
    22
    
    
    
    (41
    )NOW and money market accounts
    
    
    (303
    )
    
    
    62
    
    
    
    (241
    )Certificates of deposit
    
    
    (1,830
    )
    
    
    (875
    )
    
    
    (2,705
    )Federal Home Loan Bank advances
    
    
    (174
    )
    
    
    151
    
    
    
    (23
    )Repurchase agreements and other
    
    
    (42
    )
    
    
    41
    
    
    
    (1
    )Total interest-bearing liabilities
    
    $
    (2,412
    )
    
    $
    (599
    )
    
    
    (3,011
    )Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    (62
    )
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
  43




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 AVERAGE BALANCE SHEETS
  Three Months Ended March 31,2011
    
    
    2010Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Interest-earning assets:Net loans (1)
    
    $
    1,632,182
    
    
    $
    22,510
    
    
    
    5.52
    %
    
    $
    1,847,443
    
    
    $
    25,843
    
    
    
    5.60
    %Net loans held for sale
    
    
    7,024
    
    
    
    66
    
    
    
    3.76
    %
    
    
    7,459
    
    
    
    70
    
    
    
    3.75
    %Investment securities:Available for sale
    
    
    328,312
    
    
    
    2,847
    
    
    
    3.47
    %
    
    
    256,748
    
    
    
    2,585
    
    
    
    4.03
    %Federal Home Loan Bank stock
    
    
    26,464
    
    
    
    300
    
    
    
    4.53
    %
    
    
    26,464
    
    
    
    300
    
    
    
    4.43
    %Other interest-earning assets
    
    
    24,822
    
    
    
    9
    
    
    
    0.15
    %
    
    
    24,246
    
    
    
    7
    
    
    
    0.12
    %Total interest-earning assets
    
    
    2,018,804
    
    
    
    25,732
    
    
    
    5.10
    %
    
    
    2,162,360
    
    
    
    28,805
    
    
    
    5.33
    %Noninterest-earning assets
    
    
    129,879
    
    
    
    
    
    
    
    
    
    
    
    129,270Total assets
    
    $
    2,148,683
    
    
    
    
    
    
    
    
    
    
    $
    2,291,630Interest-bearing liabilities:NOW and money market accounts
    
    $
    425,699
    
    
    $
    635
    
    
    
    0.60
    %
    
    $
    399,624
    
    
    $
    876
    
    
    
    0.88
    %Savings accounts
    
    
    226,273
    
    
    
    167
    
    
    
    0.30
    %
    
    
    207,438
    
    
    
    208
    
    
    
    0.40
    %Certificates of deposit
    
    
    904,024
    
    
    
    5,529
    
    
    
    2.45
    %
    
    
    1,021,843
    
    
    
    8,234
    
    
    
    3.22
    %Federal Home Loan Bank advances
    
    
    139,253
    
    
    
    825
    
    
    
    2.37
    %
    
    
    181,637
    
    
    
    848
    
    
    
    1.87
    %Repurchase agreements and other
    
    
    99,185
    
    
    
    922
    
    
    
    3.72
    %
    
    
    96,987
    
    
    
    923
    
    
    
    3.81
    %Total interest-bearing liabilities
    
    
    1,794,434
    
    
    
    8,078
    
    
    
    1.80
    %
    
    
    1,907,529
    
    
    
    11,089
    
    
    
    2.33
    %Noninterest-bearing liabilities
    
    
    173,649
    
    
    
    
    
    
    
    
    
    
    
    160,162Total liabilities
    
    
    1,968,083
    
    
    
    
    
    
    
    
    
    
    
    2,067,691Equity
    
    
    180,600
    
    
    
    
    
    
    
    
    
    
    
    223,939Total liabilities and equity
    
    $
    2,148,683
    
    
    
    
    
    
    
    
    
    
    $
    2,291,630Net interest income and interest
rate spread
    
    
    
    
    
    $
    17,654
    
    
    
    3.30
    %
    
    
    
    
    
    $
    17,716
    
    
    
    3.00
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.50
    %
    
    
    
    
    
    
    
    
    
    
    3.28
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    112.50
    %
    
    
    
    
    
    
    
    
    
    
    113.36
    %
 (1)
    
    Nonaccrual loans are included in the average balance at a yield of 0%.
  44




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##### Table of Contents



ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 Qualitative Aspects of Market Risk.
 Quantitative Aspects of Market Risk.
   Quarter Ended March 31, 2011NPV as % of portfolio value of assets
    
    
    Next 12 months net interest income(Dollars in thousands)InternalChange in
    
    
    
    
    
    
    
    
    
    
    
    
    
    policyrates
    
    
    
    
    
    Internal
    
    
    
    
    
    
    limitations
    
    
    
    
    
    
    Internal(Basis
    
    NPV
    
    
    policy
    
    
    Change in
    
    
    on NPV
    
    
    
    
    
    
    policypoints)
    
    Ratio
    
    
    limitations
    
    
    %
    
    
    Change
    
    
    $ Change
    
    
    limitations
    
    
    % Change300
    
    
    8.25
    %
    
    
    6.00
    %
    
    
    -1.65
    %
    
    
    25.00
    %
    
    $
    2,758
    
    
    
    -15.00
    %
    
    
    4.37
    %200
    
    
    9.06
    
    
    
    7.00
    
    
    
    -0.84
    
    
    
    25.00
    
    
    
    2,038
    
    
    
    -10.00
    
    
    
    3.23100
    
    
    9.66
    
    
    
    7.00
    
    
    
    -0.24
    
    
    
    25.00
    
    
    
    1,182
    
    
    
    -5.00
    
    
    
    1.87Static
    
    
    9.90
    
    
    
    8.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  45




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##### Table of Contents



Year Ended December 31, 2010NPV as % of portfolio value of assets
    
    
    Next 12 months net interest income(Dollars in thousands)InternalChange in
    
    
    
    
    
    
    
    
    
    
    
    
    
    policyrates
    
    
    
    
    
    Internal
    
    
    
    
    
    
    limitations
    
    
    
    
    
    
    Internal(Basis
    
    NPV
    
    
    policy
    
    
    Change in
    
    
    on NPV
    
    
    
    
    
    
    policypoints)
    
    Ratio
    
    
    limitations
    
    
    %
    
    
    Change
    
    
    $ Change
    
    
    limitations
    
    
    % Change300
    
    
    7.37
    %
    
    
    6.00
    %
    
    
    -2.04
    %
    
    
    25.00
    %
    
    $
    (121
    )
    
    
    -15.00
    %
    
    
    -0.17
    %200
    
    
    8.33
    
    
    
    7.00
    
    
    
    -1.08
    
    
    
    25.00
    
    
    
    123
    
    
    
    -10.00
    
    
    
    0.17100
    
    
    9.08
    
    
    
    7.00
    
    
    
    -0.33
    
    
    
    25.00
    
    
    
    215
    
    
    
    -5.00
    
    
    
    0.30Static
    
    
    9.41
    
    
    
    8.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   Potential Impact of Changes in Interest Rates.
  
 ITEM 4.
    
    Controls and Procedures
   46




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##### Table of Contents



PART II. OTHER INFORMATION
 UNITED COMMUNITY FINANCIAL CORP.
 
 ITEM 1  Legal Proceedings
  
 ITEM 1A  Risk Factors
  
 ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 6  Exhibits
  Exhibit Number
    
    Description3.1
    
    
    Articles of Incorporation3.2
    
    
    Amended Code of Regulations31.1
    
    
    Section 302 Certification by Chief Executive Officer31.2
    
    
    Section 302 Certification by Chief Financial Officer32
    
    
    Certification of Statements by Chief Executive Officer and
Chief Financial Officer
  47




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 SIGNATURES
  UNITED COMMUNITY FINANCIAL CORP.Date: May 16, 2011
    
    /S/ Patrick W. BevackPatrick W. BevackPresident and Chief Executive Officer(Principal Executive Officer)Date: May 16, 2011
    
    /S/ James R. ReskeJames R. Reske, CFATreasurer and Chief Financial Officer(Principal Financial Officer)
  48




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 Exhibit 3.1
  Exhibit 3.2
   49